Southwest AirlinesSouthwest Airlines

Organized by: Team 2Seo, Seong-jeeTrung NguyenBae, Yong-gook

AgendaAgenda

1. Indicators of Excellence1. Indicators of Excellence

Zero market share in 1989, California

→ Leading airline in 1993→ 10 cities with 70% market share by 1995

Total operating revenues: $535,948(1984) to $2,296,673(1993)

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: $535,948(1984) to $2,296,673(1993)Net income: $49,724(1984) to $154,284(1993)Net income per share: $.38(1984) to $1.05(1993)

Low turn-over of employees- 4.5% (1991)- Less than half of that of other major airlines

Lower Fares comparing to the competitors

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2. Drivers of Excellence2. Drivers of Excellence

Southwest People

Efficient and Simple Business

Model

2. Drivers of Excellence2. Drivers of Excellence

Southwest People Southwest People Efficient and Simple Business Model

LeadershipGreat leaders with clear vision and goalsValue its people by building and preserving special and unique culture

Internal Customer (Employee policy)The Southwest Spirit : family, customer service, hard work, equality, cost consciousness, dedication, fun, trust by sharing information, mutual respects. E.g: the catastrophe fund

Efficiency

• Point-to-point routes

• Only fly fuel-efficient 737s

• Frequent flights

• On-time departures

• Low cost fares

the catastrophe fund

The People Department : make employees happy, prepare them to be winners, preserve the values and special cultureRecruiting: peer & customer recruiting, teamwork, fit in the culture, feedback after rejection

Training : constructive two-way communication, oriented on customer services, company spirits and values, teamwork and team building,

Southwest Work Force : low hierarchical in wage, profit-sharing, young work force, low turn-over, excellent labor-relations

Simplicity

•Simple fares: only two fares on a route

•Simple price policy: same fare within a state

•Simple service: no meal, just beverages, frill, light

snacks

•Simple booking service: discourage agents to book

tickets

•Simple frequent flyer programs: “The Company

Club”

3. Herb Kelleher’s Leadership3. Herb Kelleher’s Leadership

““““ CultureCultureCultureCulture ” made by Kelleher drives SWA to success. ” made by Kelleher drives SWA to success. ” made by Kelleher drives SWA to success. ” made by Kelleher drives SWA to success.

Leadership type Leadership type Leadership type Leadership type ---- AffiliativeAffiliativeAffiliativeAffiliative : create harmony and builds emotional bonds: create harmony and builds emotional bonds: create harmony and builds emotional bonds: create harmony and builds emotional bonds

“ people comes first” “ people comes first” “ people comes first” “ people comes first” - AuthoritativeAuthoritativeAuthoritativeAuthoritative : mobilizes people toward a vision “come with me” : mobilizes people toward a vision “come with me” : mobilizes people toward a vision “come with me” : mobilizes people toward a vision “come with me”

““““ CultureCultureCultureCulture ” made by Kelleher drives SWA to success. ” made by Kelleher drives SWA to success. ” made by Kelleher drives SWA to success. ” made by Kelleher drives SWA to success. Business structure would not be possible to maintai n without “culture”Business structure would not be possible to maintai n without “culture”Business structure would not be possible to maintai n without “culture”Business structure would not be possible to maintai n without “culture”Low fare with good service is from happy mood emplo yeesLow fare with good service is from happy mood emplo yeesLow fare with good service is from happy mood emplo yeesLow fare with good service is from happy mood emplo yeesWhen he put “people” first, company success follows When he put “people” first, company success follows When he put “people” first, company success follows When he put “people” first, company success follows

Setting Setting Setting Setting VisionVisionVisionVision and and and and GoalGoalGoalGoalSetting visible goal and leading by examples could make people believe Setting visible goal and leading by examples could make people believe Setting visible goal and leading by examples could make people believe Setting visible goal and leading by examples could make people believe

himhimhimhimThinking creatively and challenging to management g ive brandThinking creatively and challenging to management g ive brandThinking creatively and challenging to management g ive brandThinking creatively and challenging to management g ive brand---- new new new new business structure which another company can not du plicate it easily business structure which another company can not du plicate it easily business structure which another company can not du plicate it easily business structure which another company can not du plicate it easily

Interact and

communicate

Interact and

communicate

Always interacting with

people

Always interacting with

people

Listening well employee

and customers’ voice

Listening well employee

and customers’ voice

Value the peopleValue the people

Do not be afraid to be

funny and familiar leader

Do not be afraid to be

funny and familiar leader

Try to find the way the

employee and customer happy

Try to find the way the

employee and customer happy

Try to open the information

to people

Try to open the information

to people

Challenge Challenge

Challenge with

existing culture

and business

model

Challenge with

existing culture

and business

model

3. Herb Kelleher’s Leadership3. Herb Kelleher’s Leadership

Finding solution together Finding solution together

to peopleto people

Encourage employee to

make bottom-up culture

Encourage employee to

make bottom-up culture

model model

4. Threat from Competitors 4. Threat from Competitors Successful duplication of biz model of Southwest

Short-term or Long-termCom

pet

itor

THREAT

ShuttleCALite

Successful change the organization’s culture

Com

pet

itor

NONE THREAT

5. Short5. Short--term challenges and longterm challenges and long--term growth objectivesterm growth objectives

Short-term challenges

Competitions from other airlines

- Imitation of biz model and practices- Head-to-head matching of price

Suggestion

- Do not expand too quickly

- Maintain current customers and market share by enhancing customer service, preserving and updating company’s culture

Suggestion

Long-term growth objectives

Sustainable and profitable growth:

Expand routes and offer greater customer services without losing its unique competitive advantages which lie in its people

Suggestion

- Prepare for future growth by preserving and updating the unique culture even when the company size increases: anticipate changes and get the people together to find a solution

- Maintain the two-way communication to prevent overconfidence

- Smooth transition of leaderships from current management: look for capable people , enable them to learn before the actual transition

6. The ways to continue success6. The ways to continue success

Maintaining and strengthening the “Maintaining and strengthening the “Maintaining and strengthening the “Maintaining and strengthening the “ CultureCultureCultureCulture ” ” ” ” –––– people come first people come first people come first people come first

Internal Support for Employee Internal Support for Employee Internal Support for Employee Internal Support for Employee • Making creative Making creative Making creative Making creative Rewarding SystemRewarding SystemRewarding SystemRewarding System (e.g. annual “best southwest man” award) (e.g. annual “best southwest man” award) (e.g. annual “best southwest man” award) (e.g. annual “best southwest man” award)

• Supporting Supporting Supporting Supporting intraintraintraintra---- communitiescommunitiescommunitiescommunities (e.g. cooking community, soccer community) (e.g. cooking community, soccer community) (e.g. cooking community, soccer community) (e.g. cooking community, soccer community)

External Service for Customer : External Service for Customer : External Service for Customer : External Service for Customer : Strengthen MembershipStrengthen MembershipStrengthen MembershipStrengthen Membership SystemSystemSystemSystem• Special service for frequently flying customersSpecial service for frequently flying customersSpecial service for frequently flying customersSpecial service for frequently flying customers• Special service for frequently flying customersSpecial service for frequently flying customersSpecial service for frequently flying customersSpecial service for frequently flying customers

• Members’ communityMembers’ communityMembers’ communityMembers’ community

• Easier way for reservationEasier way for reservationEasier way for reservationEasier way for reservation

• Free cockFree cockFree cockFree cock---- tailtailtailtail

Finding Finding Finding Finding New WaysNew WaysNew WaysNew Ways to keep the Low Fare and Low Cost strategyto keep the Low Fare and Low Cost strategyto keep the Low Fare and Low Cost strategyto keep the Low Fare and Low Cost strategy

Preparing for the Preparing for the Preparing for the Preparing for the Post Post Post Post ---- KellerherKellerherKellerherKellerher• CEOs for a larger size of companyCEOs for a larger size of companyCEOs for a larger size of companyCEOs for a larger size of company

• CEOs who experienced the culture and know the value of the culture in SWACEOs who experienced the culture and know the value of the culture in SWACEOs who experienced the culture and know the value of the culture in SWACEOs who experienced the culture and know the value of the culture in SWA

Thank youThank youThank youThank you